BUSI1004- Review - BUSI1004‐ Financial Accounting for...

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Unformatted text preview: BUSI1004‐ Financial Accounting for Business Students Review for the final Question 1 You have the following accounts from Shiba Company as of December 31, 2011: Sales $4,500,000 Accounts receivable Cash 120,000 Unearned revenues Accounts payable 350,000 Prepaid insurance Salary expense 450,000 Retained earnings, Dec 31, 2010 COGS 2,800,000 Inventory Taxes payable 40,000 Supplies inventory Tax expense 346,800 Supplies expense Advertising expense 18,000 Notes payable, due in February 20, 2013 Bonds payable 600,000 Common shares Preferred shares 60,000 Dividends payable Short‐term investments 13,000 Buildings Long‐term investments 50,000 Depreciation expense Accumulated depreciation 130,000 Insurance expense Land 520,000 Patents Amortization expense 3,000 Bad debt expense Allowance for doubtful Goodwill accounts 12,000
Contributed surplus 20,000 Interest expense Administrative expenses 120,000 Loss on sale of equipment Note that $585,200 dividends have been declared during 2011. Required: Prepare an income statement and a statement of financial position for 2011. $430,000
30,000
45,000
200,000
78,000
6,000
12,000
10,000
630,000
80,000
700,000
12,000
2,000
80,000
5,000
55,000
180,000
22,000 Question 2 (short‐ answers) a) On April 1, 2011, you receive $20,000 rent in advance for the next 20 months. The total amount is credited to unearned rent revenue. What is the adjusting entry on December 31, 2011? b) On April1, 2011, you receive $20,000 rent in advance for the next 20 months. The total amount is credited to rent revenue. What is the adjusting entry on December 31, 2011? c) You start 2011 with $4,500 supplies inventory, you buy $14,000 supplies during the year. You pay for 60% of your supplies purchases during the year. If your ending supplies inventory as of December 31, 2011 is $6,000; what is the adjusting entry needed on December 31? d) On June 30, 2010; you buy a piece of equipment for $400,000. You paid $80,000 cash and issued a 5 year, 4% note payable for the remainder. The note requires equal semi‐annual payments of principal and interest. Interest payments should be done June 30 and December 31 of each year. What is the journal entry required on December 31, 2010? e) The beginning balance in your unearned revenues account was $5,000. What is the total amount of cash advances you received during the year if you know that the ending balance of the unearned revenue account is $9,000 and that a total of $8,000 was transferred to your sales revenue. f) The balance of the cash account per your books is $15,000 as of July 31. When you did the bank reconciliation for the month of July, your figured out the following: Outstanding Cheques $2,000 Bank service charges 20 NSF cheques 1,500 Deposits in transit 650 You recorded a $200 credit purchase of supplies as a cash purchase The bank charged you $300 by mistake Determine the adjusted balance per bank statement as of July 31, 2011? g) You have the following list of accounts from Kelso Inc. at the end of January 2011: Sales $755,000 Sales returns 10,000 Sales allowances 5,000 Purchases 305,000 Freight out 12,000 Freight in 18,000 Purchase returns and allowances 22,000 Beginning merchandise inventory 80,000 Gross profit $450,000 Required Determine the cost of goods sold and the ending inventory for the month of January 2011 h) You have the following information: Sales $45,000 Inventory, beg $15,000
A/R beginning 18,000 A/P, ending 29,000
COGS 30,000 P,P & E, beginning 300,000
A/R, ending 16,000 P,P&E, ending 250,000
A/P, beginning 24,000 Accumulated depreciation, ending 135,000
Depreciation expense 30,000 Unearned revenues, beg 4,000
Accumulated depreciation, beg 150,000 Gain on sale of assets 6,000
Unearned revenues, ending 0 Inventory, ending 17,000 1) Solve for cash from investing activities, assuming an asset with an original cost of $110,000 was sold 2) Solve for cash collected from customers 3) Solve for cash paid to suppliers i) You have the following information: Accounts receivable, beg 56,000 Allowance for doubtful accounts, beg 5,000 Credit sales ? Cash sales 180,000 Cash collections 230,000 Accounts written off 12,000 Accounts receivable, end 23,000 1) The company estimates that 2% of its credit sales will not be collected, what is the bad debt expense for the year? 2) The company estimates that 10% of its accounts receivable will not be collected at the end of the year, determine the bad debt expense. Question 3 You buy a piece of equipment on January 1, 2010 for a list price of $350,000. You pay $40,000 cash and issue a long‐term note for the remainder. You paid $4,000 for the shipping; $3,000 for installation; $1,500 for minor repairs to the equipment due to damage during the installation. The asset total useful life is estimated to be 10 years or 200,000 units of production. Its residual value is estimated to $30,000. Required: 1) Determine the annual depreciation expense under the straight‐line method 2) Determine the depreciation for 2013 assuming you are using the diminishing balance at 20%. 3) Determine the depreciation expense for 2012, assuming a total of 25,000 units were produced. 4) Assume you are using the diminishing balance method at 20% and you sell the equipment on December 31, 2014 for $130,000. Prepare the journal entries required to record the sale. 5) Assume you are using the straight‐line method and you decide to change your estimates of useful life and residual value to 15 years and $10,000 respectively on January 1, 2014. Determine the revised depreciation expense for 2014. Question 4 On June 30, 20x9, you issue $4,000,000; 9%, 10 year bonds. The interest is paid on June 30 and December 31 each year. The market rate is 8%. Required 1) Will your bonds issue at a discount or at a premium? Why? Calculate the issue price and record the issuance of bonds 2) Will your interest expense be higher or lower than your cash interest? Why? 3) Prepare the journal entries for December 31, 20x11 Question 5 You have the following information about the shareholders’ Equity of Maurice Company as of December 31, 2010: Shareholders’ Equity Contributed capital $400,000 Preferred shares, 20,000 outstanding, $8, non‐cumulative 14,400,000 Common shares, 400,000 outstanding Contributed surplus 45,000 Retained earnings 8,500,000 $23,345,000 In 2011, the following transactions took place: 1) You split the common stock 2:1 2) You issue 50,000 new shares for $19 each 3) You repurchase and cancel 4,000 shares for $16 per share 4) You declare and paay the preferred dividend, and $20 per common share Required a) Record transactions 1 to 4 b) Assuming the company’s net income for the year ended Dec 31, 2011 was $26,000,000, what is the total ending shareholders’ Equity as of December 31, 2011? ...
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